International Paper, AECOM Technology: Ratings Changes

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BOSTON (TheStreet) -- TheStreet.com's stock-rating model downgraded design and construction management company AECOM Technology(ACM Quote) to "sell."

The numbers: Fiscal third-quarter net income rose 33% to $51 million and earnings per share climbed 22% to 45 cents, hampered by a higher share count. Revenue grew 16% to $1.5 billion. AECOM's gross margin remained steady at 7%, but its operating margin declined from 5% to 4%. A quick ratio of 1.3 indicates adequate liquidity. A debt-to-equity ratio of 0.1 reflects modest leverage.

The stock: AECOM Technology has dropped 15% this year, underperforming major U.S. indices. The stock trades at a price-to-earnings ratio of 16, a discount to the market, but a premium to construction and engineering peers. The company doesn't pay dividends.

The model downgraded Cubist Pharmaceuticals(CBST Quote) to "hold."

The numbers: Third-quarter net income decreased 9% to $25 million and earnings per share declined 5% to 42 cents. Revenue grew 28% to $144 million. Cubist's gross margin dropped from 81% to 79%, but its operating margin ascended from 26% to 32%. The company has adequate liquidity, evident in its $520 million of cash. A debt-to-equity ratio of 0.6 indicates conservative leverage.

The stock: Cubist has fallen 27% this year, lagging behind major U.S. indices. The stock trades at a price-to-earnings ratio of 6, a discount to the market and biotechnology peers. The company doesn't pay dividends.

The model upgraded regional bank FirstMerit(FMER Quote) to "buy."

The numbers: Third-quarter net income decreased 24% to $23 million and earnings per share fell 27% to 27 cents. Revenue declined 10% to $165 million. FirstMerit's gross margin rose from 67% to 70% and its operating margin ascended from 33% to 36%. Around $196 million of cash reflects adequate liquidity. But a debt-to-equity ratio of 2 indicates higher-than-ideal leverage.

The stock: FirstMerit is down 5% this year, trailing major U.S. indices. The stock trades at a price-to-earnings ratio of 18, a discount to the market and regional banking peers. Shares pay a 3.3% dividend yield.

The model upgraded International Paper(IP Quote) to "hold."

The numbers: Third-quarter net income surged 150% to $371 million and earnings per share climbed 149% to 87 cents, restrained by a higher share count. Revenue declined 13% to $5.9 billion. International Paper's gross margin rose from 18% to 22% and its operating margin increased from 5% to 7%. A quick ratio of 1.1 indicates adequate liquidity. A debt-to-equity ratio of 1.7 reflects higher-than-ideal leverage.

The stock: International Paper has nearly doubled this year, outperforming major U.S. indices. The company posted a loss of $4.26 a share in the fourth-quarter. Shares pay a 0.4% dividend yield.

The model downgraded Martin Marietta Materials(MLM Quote), maker of construction aggregates such as crushed stone, sand and gravel, to "hold."

The numbers: Second-quarter net income dropped 29% to $39 million and earnings per share fell 38% to 85 cents, hurt by a higher share count. Revenue declined 22% to $466 million. The company's gross margin rose from 30% to 34% and its operating margin remained steady at 16%. A quick ratio of 1 reflects adequate liquidity. A debt-to-equity ratio of 1 indicates higher-than-ideal leverage.

The stock: Martin Marietta Materials is down 11% this year, underperforming major U.S. indices. The stock trades at a price-to-earnings ratio of 30, a premium to the market and construction material peers.

-- Reported by Jake Lynch in Boston.